Shares in media group Canal+ (CAN), producer of the Paddington films, dropped 17% to 245p after FY25 results disappointed investors. Q4 revenue growth was particularly weak, although the firm said the outlook for earnings was improving.
Sluggish growth
Group revenue excluding Vietnam and recently acquired MCG (MultiChoice Group) rose 2.6% to €6.45 million. That included a 0.9% organic increase, which just about met the firm’s guidance of positive FY LFL growth. However, Q4 LFL growth of just 0.4% marked a slowdown from the 1.2% growth registered in the first nine months.
On a positive note, FY adjusted EBIT of €527 million beat the firm’s guidance of €515 million, signalling a margin increase. Cash flow generation was also above guidance at €587 million against a forecast of more than €500 million.
Other positive news included extending sports rights with UEFA, refunding debt at cheaper rates and settling historic tax issues. The group also announced a deal with Sky to produce English-speaking drama content.
Turnaround story
The main focus, however, was Africa-focused MultiChoice which has great growth potential but needs turning round. Last year MCG saw a drop in revenue and subscriber numbers which impacted earnings.
Canal+ says it has identified run-rate cost savings from synergies of €400 million from 2030 onwards. Nevertheless, subscriber numbers and revenue are expected to decline again this year, leaving group revenue flat.
The outlook for group earnings is more upbeat, with MCG seen raising its EBIT margin to 7% to 7.5% this year. That would lift EBIT margins for the whole group to 9% against 8.4% in FY25.
We aren’t media experts, but Canal+ hasn’t really delivered for investors in its first year as a public company. In fairness, the shares were back to the IPO level at the start of February but today’s update hasn’t helped.
What we know about M&A and turnarounds is the benefits usually take a lot longer to materialise than companies think. Whether that’s increased revenue through synergies, or lower costs through synergies, investors shouldn’t hold their breath.
Read the press release here: https://www.canalplusgroup.com/en/results-and-publications
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